Head to the mountain waycastle to the south. As soon as you reach the waycastle, you'll need to return to Gran Soren. Upon your arrival, your quest will be updated and you'll have to defeat a new monster called the cockatrice.

You have to be careful of its projectiles as it can petrify you. It will fly from time to time and dive down towards its target but other than that, its attack pattern will be pretty much predictable during the entire battle.

Once you've defeated it or dealt critical damage to it, the quest will be updated and you'll have to report to Aldous. Talk to one of the marked guards to continue. After the scene, the quest will be complete.